Possible Budget Cuts Chill Affordable Housing Development

The Trump administration proposed cutting $27 billion in rental assistance. Affordable housing development is likely to suffer.

Developers are pressing pause or abandoning projects amid the uncertainty of housing-related budget cuts, the Wall Street Journal reported. The proposed 43 percent cut to federal rental assistance programs is scaring lenders, and in turn, stalling developments.

Jeff Fox, a New York City developer who planned to start construction on a senior affordable housing project in Queens by the fall, put his project on hold. He’s dependent on federal housing vouchers for his developments; the July round of Section 8 subsidies was “indefinitely postponed” due to a lack of funding from the Department of Housing and Urban Development.

Fox isn’t the only one. Deborah La Franchi, chief executive of investment-fund manager SDS Capital Group, said the lender was “gun-shy” when it came to using HUD financing. Fairstead’s Noah Hale and Merchants Capital’s Michael Drury have seen developers stall or cancel projects due to the proposed budget cuts.

More than five million people nationwide take advantage of Section 8 housing vouchers. A decline in that assistance would not only harm the relevant tenants, but landlords and developers who need the operating revenue to maintain properties and pay their debts.

Trump’s budget would put $50 billion of multifamily loans purchased by Fannie Mae and Freddie Mac between 2018 and 2023 at risk of default, according to the New York Housing Conference.

On Wednesday, the New York Housing Conference sent a letter to members of the New York Congressional Delegation, urging them to fully fund federal housing programs. The letter warned that Trump’s budget proposal would strip New York of $4.4 billion, approximately half of its federal housing funds.

The House Appropriations Committee removed Trump’s proposed overhaul of rental assistance programs, but HUD continues to lobby with congressional leaders for the budget cuts. The Senate Appropriations Committee is evaluating the Trump budget proposal on Thursday.

— Holden Walter-Warner